August 8. The dam could collapse

–The market has reacted negatively to Obama’s announcement of humanitarian air drops in Iraq.  Ironic, because Russian troops massing along the Ukraine border are also on a humanitarian mission.
–New lows in bond and ten year yields.  I last saw tens at 236, fully 11 bps below Wednesday close  Stocks are under pressure.  SPX was through its 100 day MA as of Thursday close, and Nasdaq is under the 50 day. Both are lower as of this writing.  Japan’s Nikkei down 3% today.
–I had a beer with a friend yesterday who thought that from these yield levels, there probably wasn’t much a play left in treasuries, even with a disaster in stocks.  But the fact is that vol has gone bid on the rally.  The disbelievers in the case for lower yields are still out there, but someone’s willing to pay a bit more for low yield insurance, just in case something like, well, global conflict breaks out. Or a global pandemic.  And you’d probably prefer US Fives above 150 than German ten year bunds at 1%.
–A Fed survey uncovered the stunning result that some 40% of families are financially stretched. “Overall, the survey found that as of September 2013 many households were faring well, but that sizable fractions of the population were at the same time displaying signs of financial stress.”  Next time, just send the fresh faced Chicago Fed summer intern out on the Green Line el and have him get off at Cicero and walk around a bit and (maybe) report back.  Signs of financial stress, you say?

Posted on August 8, 2014 at 5:20 am by alexmanzara · Permalink
In: Eurodollar Options

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